Posted on: March 27, 2021 Posted by: admin Comments: 0

Author: Karan Choudhary, Student at Institute of Law, Nirma University.


There are a number of Alternative Dispute Resolution (ADR) approaches available, and some are better suited to particular circumstances than others. In this article, the author will compare conciliation and arbitration after listing the features of conciliation that distinguish it from arbitration. Following that, the author would suggest that conciliation is a better and more sensible option than arbitration. In order to explain this, the author will present several examples in which the conciliation procedure is preferred over the arbitration.


That the conciliation is a process wherein the conciliator does not have to strictly observe the law; he may convince the parties to find an agreement based on ex request bono or amiable compositeur[1] principles. Here are the points which justify why conciliation is the better choice:-

  1. Under arbitration the commercial activities that result in conduct that have occurred but are often difficult to establish as “facts” in court or arbitration under the rules of proof. Parties cannot accept these facts in arbitration or litigation because they are aware that the other party cannot assert them. However, in conciliation, these may be accepted and justice served, as it should be.
  2. Confidentiality is assured in the conciliation process. Only the conciliation would be allowed to use the declarations, compromises, and admissions made, as well as the documents produced. These cannot be used to support claims in future arbitrations or lawsuits. Furthermore, since the conciliator may not be the arbitrator in the same case, a party who admits a role in conciliation may seek evidence of the facts claimed in arbitration or litigation from the other party.
  3. Since conciliation is not enforced like an award or order, the end result is satisfactory to all parties.

Conciliation differs from arbitration in that it is more acceptable in some circumstances:

  1. Decisions made by individuals in a partnership arising from circumstances involving “non-legal obligations” are not arbitrable.
  2. Such decisions concerning the parties’ relationship based on the parties’ “unfettered” and “unrestricted” rights.
  3. Minor violations of legal obligations that do not usually result in termination or large-scale liabilities but create a lack of confidence between the contracting parties are best managed by conciliation rather than arbitration.
  4. Operational problems that are not arbitrable yet have an effect on the contracting parties’ ongoing relationship.
  5. Operational problems that have deteriorated to the point where lines of division have been drawn and roles have become unrectractable without the other side yielding. Arbitration in such situations will only exacerbate the situation and eliminate the chance of collaboration.
  6. As a result, the chances of stronger enforcement improve significantly.
  7. Conciliation is more appropriate because the result of arbitration and/or trial is both unpredictable and incurs an unnecessary additional cost.
  8. Before the parties reach a settlement agreement, the possibility of arbitration or litigation remains available.
  9. The agreement is handled as though it were a court order, and it should be carried out as such.
  10. After the Act, the cause of action, i.e., the conciliation matter, may be said to have merged with the settlement being final, and no party may pursue litigation or arbitration on such issues as an afterthought. The Supreme Court of India upheld this proposition in a case where the parties had resolved their differences and one of them tried to arbitrate the difference. The court held that a party could not pursue arbitration on a matter after agreeing to a settlement because all disputes would be resolved by the settlement and there would be no conflict.[2] As a result, there will be no space for appeals. Conciliation provides a sense of closure that arbitration does not always have.

In India, conciliation has been fruitful thanks to a structure known as Lok Adalat (people’s court). There were originally ad hoc committees made up of eminent individuals, attorneys, judges, social advocates, government officials, and paralegals who would attempt to assist parties in finding a settlement during the pre-litigation period.[3] The judiciary has benefited from the Lok Adalats because courts have referred parties to them when they believe a conflict will be best settled there. The number of cases resolved demonstrates the effectiveness of the Lok Adalats: more than 13,000 Lok Adalats were held in India between March 31, 1996 and March 31, 1997, resulting in the settlement of 5 million cases.  The plaintiffs were compensated in 278, 801 cases of auto accident claims totaling 8,612 million Rupees.[4]

Lok Adalats have, in certain respects, reached the rank of ADR. The fact that courts set aside a day every fortnight or month to hear cases in which the parties have decided to settle out of court through the Lok Adalat demonstrates its popularity. It may also be a message about people’s preferences for conflict resolution procedures, as well as their dissatisfaction with the justice system’s inconsistencies and delays. That could be the signal for us to try to resolve disagreements by conciliation, now that the judiciary is starting to see the value in it. Therefore, it can be concluded that Conciliation is most favored choice in comparison to arbitration.


[1]Industrial Dispute Act, 1947 also See  S.C Sharma, Arbitration & Conciliation Act, 1996, Central law Publication, (8th Ed., 2019)

[2]Nathani Steels Ltd. v. Associated Constructions, 1995 Supp(3) SCC 324; P.K. Ramaiah& Co. v. N.T.P.C., 1994 Supp (3) SCC 126; see also, State of Maharashtra v. Nav Bharat Builders, 1994 Supp(3) SCC 83.

[3]These have been institutionalized by the National Legal Services Authority Act, 1985.

[4]National Legal Services Authority Act, 1976.

Leave a Comment